The Empire State Manufacturing Survey index declined but remains in expansion. Overall this survey remains near the lowest values seen in almost two years.

Analyst Opinion of Empire State Manufacturing Survey

With both the main index and key indices declining, this was a worse report than last month.

Econintersect reminds you that this is a survey (a quantification of opinion). Please see caveats at the end of this post. However, sometimes it is better not to look too deeply into the details of a noisy survey as just the overview is all you need to know

• Expectations from Econoday were between 8.0 to 14.1 (consensus 10.0) versus the 3.7 reported. Any value above zero shows expansion for the New York area manufacturers.
• New orders sub-index of the Empire State Manufacturing improved and remains in expansion, whilst the unfilled orders sub-index improved but remains in contraction
• This noisy index has moved from , 22.5 (March 2018), 15.8 (April), 20.1 (May), 25.0 (June), 22.6 (July), 25.6 (August), 19.0 (September), 21.1 (October), 23.2 (November), 10.9 (December), 3.9 (January 2019), 8.8 (February) - and now 3.7

From the report:

Business activity grew only slightly in New York State, according to firms responding to the March 2019 Empire State Manufacturing Survey. The headline general business conditions index fell five points to 3.7. New orders increased only marginally, while shipments grew modestly. Delivery times and inventories held steady. Labor market indicators pointed to an increase in employment, but a small decline in hours worked. The prices paid index moved higher for the first time in four months, pointing to a pickup in input price increases, while the prices received index moved lower, indicating a slowing in selling price increases. Indexes assessing the six-month outlook suggested that firms remained fairly optimistic about future conditions.

SLUGGISH GROWTH

Manufacturing firms in New York State reported that business activity expanded only slightly. The general business conditions index fell five points to 3.7, its third consecutive monthly reading below 10, suggesting that growth has remained quite a bit slower so far this year than it was for most of 2018. Thirty percent of respondents reported that conditions had improved over the month, while 25 percent reported that conditions had worsened. The new orders index fell five points to 3.0, indicating that orders grew at a slower pace than last month. The shipments index declined three points to 7.7, a level indicating that shipments grew modestly, though representing the lowest reading in more than two years. Unfilled orders inched higher, and delivery times and inventories were little changed.

The above graphic shows that when the index is in negative territory that it is not a signal of a recession - of 10 times in negative territory (since the Great Recession) - no recession occurred. Conversely, a positive number is likely to be indicating economic expansion. Historically, when it does make a correct negative prediction it can be timely - this index was only two months late in going negative after what was eventually determined to be the start of the 2007 recession.

This survey has a lot of extra bells and whistles which take attention away from the core questions: (1) are orders and (2) are unfilled orders (backlog) improving? - and the answer is that the key internals were mixed with unfilled orders improving and now in expansion, and new orders declining but still in expansion.

Unfilled order contraction can be a signal for a recession.

Summary of all Federal Reserve Districts Manufacturing:

Richmond Fed (hyperlink to reports):

Kansas Fed (hyperlink to reports):

Dallas Fed (hyperlink to reports):

Philly Fed (hyperlink to reports):

New York Fed (hyperlink to reports):

Federal Reserve Industrial Production - Actual Data (hyperlink to report):

Holding this and other survey's Econintersect follows accountable for their predictions, the following graph compares the hard data from Industrial Products manufacturing subindex (dark blue bar) and US Census manufacturing shipments (lighter blue bar) to the Dallas Fed survey (light blue bar).

In the above graphic, hard data is the long bars, and surveys are the short bars. The arrows on the left side are the key to growth or contraction.

Caveats on the use of Empire State Manufacturing Survey:

This is a survey, a quantification of opinion - not facts and data. Surveys lead hard data by weeks to months and can provide early insight into changing conditions. Econintersect finds they do not necessarily end up being consistent compared to hard economic data that comes later, and can miss economic turning points.

According to Econoday:

The New York Fed conducts this monthly survey of manufacturers in New York State. Participants from across the state represent a variety of industries. On the first of each month, the same pool of roughly 175 manufacturing executives (usually the CEO or the president) is sent a questionnaire to report the change in an assortment of indicators from the previous month. Respondents also give their views about the likely direction of these same indicators six months ahead.

This Empire State Survey is very noisy - and has shown recessionary conditions throughout the second half of 2011 - and no recession resulted. Overall, since the end of the 2007 recession - this index has indicated two false recession warnings.

No survey is accurate in projecting employment - and the Empire State Manufacturing Survey is no exception. Although there are some general correlation in trends, month-to-month movements have not correlated with the BLS Service Sector Employment data.

Over time, there is a general correlation with real manufacturing data - but month-to-month conflicts are frequent.